Infrastructure improvements are needed to cope with the expected growth.

Passenger traffic is 8.7 % higher than 2001 and a recovering Japan could push this even higher. At the same time, the emerging low cost sector in Southeast Asia adds a new dimension to competition.

Overall growth in Asia is also a reminder of a common theme — the importance of cargo. In Asia-Pacific it is 25.2 % above 2001. Globally it is up 15.5%.

Industry-wide, cargo was a financial lifeline for many airlines. But the strength of the cargo business is not an excuse to relax.

We must achieve greater efficiencies to support future growth.

***

Overall, there is no single state that describes the industry.

The challenges are as great as the opportunities.

Your Association

Your Association has been at your side, fighting the many fires that have affected the industry.

Last year we achieved 630 million dollars cost savings from airports and air navigation service providers.

This year, airports from Vienna to Seoul reduced or rolled-back increases in user charges.

We shouted in a polite way when Toronto gave our industry a Versailles with boarding bridges.

The industry will not pay for extravagance. I will continue to be a thorn in the side of partners who do not understand our needs.

Our protests eliminated cross-subsidy in privatization plans for Narita. In Hong Kong IATA engaged the government to ensure that economic regulation was included in airport privatization plans.

The message must be clear: air transport is the economic lifeblood of a community.

Governments must stop milking the industry to solve their inefficiencies or a city's budget problems.

We are taking the European Union to court to fight misguided regulations concerning compensation for flight cancellations and delays.

They wanted to make airlines take responsibility for snow!

It is high time that European Union regulators took the trouble to learn about the industry they are busy mis-regulating.

Our achievements helped the industry survive three very difficult years. Now, we must move from fighting fires to designing new industry structures.

We must drive rigidity and complexity out of our business.

Rigidity

As an industry, we have always been subject to the ups and downs of business cycles.

The shocks of recent years tested our ability to change and manage costs under extreme conditions.

On top of that, with thousands of aircraft parked in the desert, the barriers to entry have never been lower.

New entrants come with challenging ideas, lower costs and different labour relations.

Cost flexibility has never been more critical—and this includes labour.

It is incredible that airlines can go bankrupt or enter chapter 11 before workers accept the case for change.

We share a common and great future. For those who are ready to change, the future will be bright.

Complexity

We must also recognize the complexity of our traditional model.

Let's remember that consumers pay for value, not for complexity.

The traditional model is being pressured in all corners of the globe.

The challenge is to retain the value of the network system but eliminate the costs of complexity.

And I believe that the term "low cost carrier" is absolutely wrong. Our future structure is a "low-cost industry", with some airlines offering network services at a premium the consumer is willing to pay for.

How do we get from here to there?

The Agenda

To start, we must shift our agenda from firefighting to building a new industry structure.

The key new design element is "simplifying the business."

To move forward, we need strong leadership and a vision of change that is shared by all stakeholders.

Simplifying our Business

Let's begin by looking under the hood at the systems that keep the industry working.

IATA manages many services we all take for granted: the interline system, the clearing house, the settlement system and so on.

Simplifying the business starts here.

Re-structuring European BSP activities will save the industry 25 million dollars each year.

This is the first step of a global transformation.

All IATA's bank settlement and clearance systems, which handle over one hundred and eighty billion dollars, are now web-enabled.

This sets the stage for even greater gains if we get rid of paper entirely —worldwide.

Paper costs money — a paper ticket is nine dollars more expensive than an e-ticket. IATA distributes 300 million paper tickets each year.

You do not need to be a rocket scientist to understand that up to 3 billion dollars in savings are possible.

Technology can also make us more efficient.

We need to look for similar opportunities throughout our businesses:

Radio frequency baggage tags

Bar coding technology

Sharing self-service check-in kiosks.

All of these can deliver significant cost benefits today. And they will make the travel experience more efficient.

For example, with bar coding, the web and a printer, a passenger can print a boarding pass at home.

We need to think big.

Already the US domestic market is approaching 100% e-ticketing, while internationally we are only at 12%.

But we all know the importance of simplifying our individual businesses.

Now we must have the edge to commit to a vision of simplifying our industry.